NASA has its ways of doing things, and when it comes to rocket construction, they go back to the lessons of rocket pioneer Werner Von Braun, who brought the rocket expertise he used to help Germany during World War II over to the United States and helped us reach the Moon. Von Braun felt that the best way to do things was to manufacture the rocket on-site, where the engineers lived and worked, thus controlling both costs and production for as long as possible. The problem is that in this time of record public debt and shocking deficits, where every dollar has both an economic and a political value attached to it, money for innovation and execution can be hard to come by, and NASA, well, they are the innovation people and the thinking in Washington is that maybe they ought to concentrate on what they do best. According to BusinessWeek:

The agency looks headed for a course correction. The White House has set up a blue-ribbon commission to help decide the future direction of manned flight. Headed by Norman Augustine, a former chief executive of defense contractor Lockheed Martin, the group plans to deliver several broad options to the Obama Administration by the end of August. Augustine, in a press briefing earlier this month, said the commission will "take a fresh independent look and go where the facts lead."

One option under serious consideration is whether NASA should tap the private sector more actively. Since its founding, the agency has done the heavy lifting in space exploration largely by itself—conceiving of missions, designing rockets, and executing flights. Companies such as Boeing, Alliant Techsystems, and Lockheed Martin simply built spacecraft to NASA's specs. Some experts argue that NASA should lean on private companies more heavily, perhaps to design rockets or execute such mundane missions as shuttling supplies up to the International Space Station. "The commercial sector could have a much bigger role," says Keith Cowling, editor of a Web site called NASA Watch, which monitors agency projects. "But NASA has to be willing to give up its monopoly on manned space flight. And that's the big question."

NASA declined to comment specifically. But Augustine has said his commission is looking at the prospect of greater private sector involvement. The idea is that NASA could accomplish more with its existing $17.3 billion budget if it could focus on the most important issues, such as setting ambitious goals and investing in long-term research and development and executing the goal of putting a man on Mars.

Ready to pick up the slack in engineering and production are a number of small and medium sized businesses, including SpaceX and Orbital Sciences and for those involved, like Elon Musk, SpaceX founder and CEO, it’s a natural fit. "If you look at any other mode of transporting goods and people, on planes or trains, most people would say that these things should be done by the commercial sector."

In a bid to see how well the private sector would serve the needs of NASA in putting men and cargo into space, SpaceX and Orbital Sciences, a medium-sized business, have been given $500 million to prove that they can develop the technology needed to deliver cargo to the International Space Station (ISS), demonstrating this capability by launching three successful demonstration flights by the end of 2010. If successful, NASA will pay each company approximately $1.6 billion for a dozen cargo missions to the ISS through 2015. “We are very appreciative of the trust NASA has placed with us to provide commercial cargo transportation services to and from the International Space Station, beginning with our demonstration flight scheduled in late 2010,” said Mr. David W. Thompson, Orbital’s Chairman and Chief Executive Officer. “The CRS program will serve as a showcase for the types of commercial services U.S. space companies can offer NASA, allowing the space agency to devote a greater proportion of its resources for the challenges of human spaceflight, deep space exploration and scientific investigations of our planet and the universe in which we live.”

The Bottom Line

That $1.6 billion per company breaks down to $133 million per flight, which is less than one-third of NASA's cost for such missions. "This is the only way NASA can afford to both service the station and go back to the moon," observes John Gedmark, president of the Commercial Space Flight Federation.

It’s also a tribute to the power of the private sector, especially America’s small and mid-sized businesses where, like NASA, innovation reigns supreme—only at one-third the price!